VK Constructions Pty Ltd v Train Street Development Pty Ltd
[2022] VCC 1540
•16 September 2022
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Building Cases List
Case No. CI-22-02811
| VK Constructions Australia Pty Ltd (ACN 616 649 462) | Plaintiff |
| v | |
| Train Street Development Pty Ltd (ACN 613 425 255) | Defendant |
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JUDGE: | Her Honour Judge Burchell | |
WHERE HELD: | On the papers | |
DATE OF HEARING: | Affidavits affirmed 15 July, 26 August, 6 and 13 September 2022 and submissions filed 13 September 2022 | |
DATE OF JUDGMENT: | 16 September 2022 | |
CASE MAY BE CITED AS: | VK Constructions Pty Ltd v Train Street Development Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1540 | |
REASONS FOR JUDGMENT
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Subject: CONTRACTS
Catchwords: Building contract – payment claims – invalid payment claims – whether plaintiff’s payment claim failed to comply with formal procedural requirements
Legislation Cited: Building and Construction Industry Security of Payment Act2002 (Vic) ss9, 12(2), 14(2), 14(4), 14(5), 14(6), 16(2) and 48; Civil Procedure Act 2010 (Vic) s61
Cases Cited:Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; Vanguard Developments v Promax [2018] VSC 386; Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112; Pearl Hill Pty Ltd v Concorp Construction Group (Vic) Pty Ltd [2011] VSCA 99; Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385; 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674; SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; John Beever v Roads Corporation [2018] VSC 635; Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mahl Lawyers | |
| For the Defendant | Mr R A Harris | Wisewould Mahony |
HER HONOUR:
Summary and outcome
1 In this proceeding, the plaintiff (“VK Constructions”) applies for judgment against the defendant (“Train Street Development”) pursuant to s16(2) of the Building and Construction Industry Security of Payment Act2002 (Vic) (“SOP Act”). VK Constructions makes the application by summons on originating motion dated 18 July 2022. The application arises out of domestic building works carried out on four units at 3 Train Street, Highett, Victoria 3190 (“the Works”).
2 The proceeding concerns a payment claim issued by the VK Constructions by way of Invoice INV-0425, in the amount of $252,500.00 dated 6 May 2021, however, issued by the plaintiff to the defendant on 8 June 2022 (“Payment Claim”).
3 VK Constructions submits that it is entitled to an order for the sum of $252,500.00 pursuant to s16(2)(a)(i) of the SOP Act, interest on the judgment sum at a rate of 13.90% per annum pursuant to s12(2)(b) of the SOP Act and Schedule 1 and Item 8 of the building contract between VK Constructions and Train Street Development dated 8 January 2019 (“the Contract”) as well as VK Constructions costs incidental to the proceeding.
4 Train Street Development opposes the judgment on the basis that:
a. the Payment Claim was not a payment claim within the meaning of s14(2)(c) and (d) of the SOP Act as it fails to adequately identify the construction work.
b. the Payment Claim was not a payment claim within the meaning of ss14(4) or (5) of the SOP Act as there was no available reference date.
c. the Payment Claim was not a payment claim within the meaning of s14(6) of the SOP Act as no further payment claim may be served in relation to the Contract once a payment for a claim in respect of a final payment has been served under the SOP Act.
5 In my judgment, the defence is made out insofar as the plaintiff failed to satisfy the formal requirements of s14(2) of the SOP Act in its Payment Claim and, further, did not adhere to requirements under ss14(4) or (5) of the SOP Act. My reasons for each ground are set out below.
6 Accordingly, there will be an order that the plaintiff’s summons on originating motion be dismissed, and that the plaintiff pay the defendant’s costs of and incidental to the summons on the standard basis, to be taxed in default of agreement, unless either party has a basis for seeking a different order as to costs. I invite the parties to prepare draft orders to give effect to these reasons. I will determine any issue concerning costs on the papers.
The relevant facts
7 VK Constructions relies upon two affidavits of Mr Davinder Randhawa, Director of VK Constructions affirmed on 15 July 2022 and 26 August 2022 and two affidavits of Mr Chirag Grewal, the plaintiff’s solicitor, affirmed on 15 July 2022 and 26 August 2022 respectively. Train Street Development relies upon the affidavits of Mr Dhvantkumar Antikumar Nimeshkumar Shah, Director of Train Street Development, affirmed on 6 September 2022 and 13 September 2022 respectively.
8 Both parties provided written submissions to which I have had regard.
Initial Discussions
9 Mr Randhawa says he had first met Mr Abnhishek Joshi and Mr Tarun Jain, Directors of Train Street Development, and their initial discussions were based on an in-principle agreement that the Works would be completed for the sum of $1,347,500.00. In around late 2018, a draft contract was prepared to this effect and is the contract that Train Street Development intends to rely on.
10 Mr Shah says that he has spoken to Mr Joshi and Mr Jain, and they have informed him that they have never met or spoken to Mr Randhawa. Mr Shah says that Train Street Development appointed a company named “Architectural” to build the four-unit development in August 2017 and had paid a $54,000.00 deposit. In December 2017, “Architectural” went into liquidation and they were looking for another builder. Mr Shah says that he was introduced to VK Constructions and its owner Mr Randhawa in October 2018. After negotiations between himself and Mr Randhawa, Train Street Development agreed to a contract with VK Constructions, in respect of the Works, for the agreed sum of $1,374,500.00. On 3 December 2018, Mr Randhawa had emailed a building contract in respect of the Works. The contract in the sum of $1,374,500.00 was executed by Mr Randhawa on 22 November 2018. Mr Shah says that Mr Joshi and Mr Jain, as Directors of Train Street Development, executed the Contract on 8 January 2019.
Contract
11 VK Constructions assert that the Contract for the sum of $1,374,500.00 was never signed by VK Constructions, nor was it submitted to the Relevant Building Surveyor, for the grant of the building permit, or submitted to the VMIA for the grant of insurance policies in respect of the Works.
12 VK Constructions say that since the preparation of the initial draft contract, the Directors of Train Street Development continued to request further amendments and additions to the Works which resulted in a significant increase to the scope and expense.
13 In or around November 2018, Mr Randhawa says he contacted Mr Joshi and Mr Jain and advised them that VK Constructions could not complete the Works for anything less than $1,600,000.00. Mr Randhawa says that Mr Jain and Joshi agreed to this and later in November 2019, Mr Randhawa sent the contract which stipulated a contract price of $1,600,000.00.
14 Mr Shah says that, in early December 2018, he had a discussion with Mr Randhawa and advised him that Train Street Development had already lost its deposit with the previous builder “Architectural” and would not be in a position to afford any variations or ancillary costs. Further, that it could only borrow 90% of building costs from its lender Rams Home Loan Australia (“RAMS”).
15 Mr Randhawa had suggested to change the sum of the contract to read $1,600,000.00 to enable greater borrowing to cover the loss of the deposit and costs that fell outside the contract price. After some consideration, Mr Shah agreed and changed the price of the contract. On 15 December 2018, Mr Randhawa sent Mr Shah an email which attached two signed contracts. Both were signed by Mr Randhawa on 22 November 2018, one for the sum of $1,347,500.00 and the other for the sum of $1,600,000.00 for banking purposes.
16 In the email dated 15 December 2018, Mr Randhawa referred to two building contracts and made specific reference that “the one labelled Shah Train Street Contract is one for the bank”. Another email circulated on 31 January 2019 also mentioned that the contract was for banking purposes.
17 Mr Randhawa says that on or about 8 January 2019, Train Street Development executed the Contract. Shortly thereafter, the Contract was submitted to the Relevant Building Surveyor for the grant of a building permit and the VMIA who issued building insurance policies.
18 Mr Shah says the compulsory insurance obtained by VK Constructions on 18 January 2019, in respect of the Works, showed a contract price of $1,347,500.00 and was sent to him by Mr Randhawa on 25 January 2019. However, because the contract provided to the bank was for $1,600,000.00, the bank required insurance for that sum. Mr Shah says that VK Constructions provided an invoice in the sum of $7,000.00 referable to the Domestic Building Insurance Policy in the sum of $1,600,000.00, which was paid from Train Street Development on behalf of VK Constructions.
19 Mr Shah asserts that the reason Train Street Development entered into two contracts was because it had lost its deposit to “Architectural” and wanted to be in a position to cover other costs and fees which fell outside the contract price as well as likely variations.
20 Mr Randhawa deposes that when VK Constructions’ account manager set up the invoicing for the Works, there was an administrative oversight in which the invoices for the Works were issued on the basis of the earlier Contract price of $1,347,500.00 and not the actual contract price of $1,600,000.00.
21 Mr Shah says the staged invoices rendered reflect the progress payments in the Contract for the sum of $1,347,500.00 and he disagrees that this was an error on behalf of VK Constructions.
22 Further, Mr Shah says that he never had a discussion with Mr Randhawa in May 2021 or at any other time in respect of the issues detailed above.
23 The Contract provided for the following terms:
a. progress payments would be made in respect of the Works as outlined at “Method 2” of Schedule 3 of the Contract;
b. pursuant to Item 8 of Schedule 1 to the Contract, interest would be payable on any late payments at the rate of 13.90% per annum;
c. pursuant to Clause 39 of the Contract, the Works would be subject to a defects liability period of 3 months from the date on which the Works reached Completion; and
d. pursuant to Clause 6 of the Contract, notices issued pursuant to the Contract could be issued by email.
24 On or about 2 March 2020, a building permit was issued in respect of the Works. On 24 August 2021, an occupancy permit was issued. The defects liability period in respect of the Works was due to end on 23 November 2021.
Invoices
25 VK Constructions issued 8 separate invoices to Train Street Development between 9 July 2019 and 19 May 2021. None of the invoices, at the time they were issued, include wording prescribed by the SOP Act. Mr Randhawa states that this was because he was eager to work amicably with Train Street Development to complete the Works.
26 Mr Shah says that a substantial number of Payment Claims and Variation when first sent to Train Street Development by VK Constructions made no reference to the SOP Act. This matter was addressed by Train Street Development’s Lawyers, Wisewould Mahony, in a letter dated 10 August 2022 and sent to VK Constructions’ solicitors, Mahl Lawyers. Mr Shah says that the Payment Claims and Variations which were forwarded in a link were subsequently altered so that when he opened the link sometime after the date of the Payment Claim, variations had been amended to refer to the SOP Act. Invoices issued up to and including the Completion Stage Invoice dated 13 May 2021 did not reference the SOP Act.
27 It is common ground between the parties that the Payment Claim was served on the defendant on 8 June 2022 and that no payment schedule had been served within the prescribed time under the SOP Act.
28 Further, Mr Shah says that the Payment Claim Invoice INV-0425, while dated 6 May 2021, was first sent to Train Street Development on 8 June 2022, despite having a creation date of 6 May 2021.
Completion Stage Invoice
29 Mr Randhawa says that, in or around May 2021, Mr Shah contacted him by phone and advised that Train Street Development was having trouble procuring the release of funds from its lender and had fallen behind with the payment of the invoices. Mr Shah requested VK Constructions’ account manager to prepare a completion invoice for $160,000.00, which would assist Train Street Development to catch up on invoices.
30 On 13 May 2021, VK Constructions issued an invoice for the Completion of the Works in the amount of $160,000.00, which did not contain the prescribed SOP Act wording.
31 Further, Mr Shah says, in respect of the of the Completion Stage Invoice dated 13 May 2021, he received an email showing the Completion Stage Tax Invoice in the amount of $160,000.00, however, when clicking to view the invoice, it showed the amount of $61,250.00 with $8,375.00 outstanding. Mr Shah says that he does not know why VK Constructions sent an invoice for $160,000.00 when the Completion Amount was $67,375.00.
32 On 2 August 2022, Mr Shah says he sent his solicitors the details of the invoices and incorrectly sent the tax invoice showing the Completion Amount of $160,000.00. He says this led his solicitors to attach the wrong invoice in their letter to VK Constructions’ solicitors on 10 August 2022. The correct amount was for $67,375.00.
Defects Liability Period
33 There is a dispute between the parties as to whether, in or around November 2021, there was an oral conversation between Mr Shah and Mr Randhawa whereby it was agreed that the defects liability period would be extended for a period of 6 months to end on 22 May 2022.
34 On 24 August 2021, the Occupancy Permit was issued in respect of the Works and the defects liability period for the Works was due to end on 23 November 2021. Around this time, Mr Randhawa says that Mr Shah contacted him to advise that Train Street Development was having trouble selling the units which had resulted in delays in its lender releasing funds for the Works. Mr Shah had enquired whether VK Constructions would extend the defects liability period and assured Mr Randhawa that all amounts due to VK Constructions would be paid at the conclusion of the extended defects liability period. Mr Randhawa agreed, and the defects liability period was extended to 22 May 2022.
35 Mr Randhawa says that, in order to rectify this, Mr Shah requested that his daughter, Ms Komal Randhawa, prepare the Completion Invoice in the sum of $160,000.00, as referred to earlier.
36 Between November 2021 and June 2022, Mr Randhawa says that VK Constructions continued to liaise with both Train Street Development and the occupiers of the units to rectify various minor issues.
37 Mr Shah says that all the money was coming from RAMS through an approved construction loan and that there were no lending issues. Mr Shah says he did not make any calls to Ms Komal Randhawa and has never met her or spoken to her.
38 Further, Ms Shah says that the Occupancy Permit was issued on 24 August 2021 and that he never requested any defect liability period extension from Mr Randhawa or VK Constructions, either verbally or in writing.
39 Mr Shah also says that at no stage did he request for an extension of the defects liability period. The sale of the units by Train Street Development settled for Unit 1 on 18 October 2021, Unit 2 on 30 September 2021, Unit 3 on 21 January 2022 and Unit 4 on 28 February 2022.
40 Mr Shah says the correspondence referred to by Mr Randhawa concerned the unit owners pursuing rectification works under the builder warranty directly with the builder. Train Street Development had no involvement in this matter and Mr Shah is unaware of the communications between VK Constructions and the unit holders.
41 The last works that VK Constructions completed and requested by Train Street Development was the jackhammering of the basement ramps which was carried out in mid-December 2021.
Outstanding Payments
42 As of May 2022, VK Constructions says it had still not received amounts outstanding under the invoices. Mr Randhawa says that he became aware, around this time, of the administrative error in the invoicing of the Works being set up on the basis of the initial contract price of $1,347,500.00. Mr Randhawa emailed Mr Shah on 27 May 2022, noting that there was an amount of “over 58k owing on my end”. Mr Randhawa says that he received no response from Mr Shah to his email.
43 Mr Shah says that on 27 May 2022, he received an email from Mr Randhawa saying the amount owing was $58,575.00 and that this is inconsistent with the claim now rendered by VK Constructions.
44 Later in May 2022, Mr Randhawa says he conducted a complete reconciliation of the Works and realised the remainder of the contract price owed by Train Street Development to VK Constructions in respect of the Works was in fact much higher and approximately $276,697.00. Accordingly, Mr Randhawa prepared a further invoice for the remaining amount due. This invoice included the prescribed work under the SOP Act. Further, Mr Randhawa applied a discount of $24,197.00 to ensure that he was not overclaiming the amount owed to VK Constructions.
45 Mr Shah says that Train Street Development has paid a total sum of $1,581,411.65 to VK Constructions and that the payments were made referrable to the Payment Claims and Variations rendered by VK Constructions. Further, that all sums borrowed from RAM has been repaid in full.
46 Mr Shah also deposes that on 16 September 2021, he received an email from Mr Randhawa attaching an invoice for the ‘Completion’ of the Works Invoice INV-0207 for the balance of $67,375.00 without reference to the SOP Act. When one clicked on the “view invoice” link, it showed the SOP Act working with an outstanding balance of $8,375.00.
The legal context
47 The SOP Act seeks to ensure that people who undertake to carry out construction work can recover progress payments for the performance of that work.[1] Section 4 defines construction contract as a “contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services for another party”. The SOP Act applies to any construction contract whether written or oral, or partly written and partly oral.[2] “Construction work” is defined by s5. There is no dispute that the Works the subject of this proceeding is “construction work” within the meaning of s5.
[1] SOP Act s3.
[2] SOP Act s7.
48 Section 16(2)(a) of the SOP Act provides that a claimant may recover from a respondent any unpaid portion of an amount claimed in a payment claim where the respondent fails to submit a payment schedule within time (or at all) in response to the payment claim.
23 Section 14 of the SOP Act concerns the form and content of payment claims. Sections 14(2) and (3) relevantly provide that a payment claim:
a. must be in the prescribed form (if any) and contain the prescribed information (if any) – neither is prescribed;
b. must identify the construction work or related goods and services to which it relates;
c. must indicate the amount of progress payment that the claimant claims to be due;
d. must state that it is made under the SOP Act; and
e. must not include any “excluded amounts” (being amounts referable to particular categories of variations).
24 Section 14(4) of the SOP Act addresses when a payment claim can be served, where it is not a payment claim in respect of a final, single or one-off progress payment. It provides that such a payment claim may only be served within:
a. the period determined in accordance with the construction contract “in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates”; or
b. the period of 3 months after the “reference date referred to in s 9(2) that relates to the progress payment”.
25 Section 14(5), (6) and (7) of the SOP Act concern payment claims claim in respect of a final, single or one-off progress payment. A payment claim in respect of a final payment may be served only within 3 months after the reference date referred to in s9(2) that relates to progress payments where the terms of the contract do not provide a period. Nothing prevents a payment claim for a final payment being served under the Act if the claim is made under the contract and the amount has not been paid by the due date under the contract.
26 Another important provision informing the formal requirements for payment claims under the SOP Act is s9. Section 9(1) provides that “on and from each reference date under a construction contract” a claimant is “entitled to a progress payment under this Act calculated by reference to that date”.
27 Section 9(2)(d)(i) provides that a reference date in the case of a final payment where the contract makes no express provision is the date immediately following the expiry of any period provided in the contract for the rectification of defects or omissions in the contract.
28 It is now well established in Victoria that unless a payment claim answering the description in s14(1) of the SOP Act is served, there can be no application to a court under s16(2)(a)(i). Although dealing with the alternative option of an adjudication application referred to in the New South Wales equivalent of s16(2)(a)(ii), this follows inexorably from the decision of the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd[3] (“Southern Han”). On the other hand, the available defences to a payment claim are very limited.
[3](2016) 260 CLR 340 at [44].
29 Generally speaking, the available defences concern either the nature of the underlying contract or the form and service of the purported payment claim, and thus whether the payment claim is effective to trigger the procedures established by Part 3 of the SOP Act.[4] More particularly, the defences to a payment claim enlivened by the formal requirements of the SOP Act are, in substance, that the payment claim:
[4]Southern Han at [62].
a. does not relate to a “construction contract” (including because it does not involve carrying out “construction work”), or it relates to a construction contract excluded from the operation of the Act under s7 (for example, a construction contract that forms part of a loan agreement, or one that is a domestic building contract under the Domestic Building Contracts Act 1995);
b. fails to satisfy the formal requirements of s14(2) (for example, by failing to identify the construction work or failing to state that it is made under the SOP Act);
c. was made when no valid reference date existed,[5] including where it is served before an applicable reference date or relies on a reference date that has already been used up by an earlier payment claim;[6]
[5]Southern Han at [61]–[62]; Vanguard Developments v Promax [2018] VSC 386, Kennedy J at [121].
[6] SOP Act s14(8).
d. includes variations that are “excluded amounts” under s10B; and
(a) was not validly served on the respondent under either the terms of the contract or under s50.
30 Under s47, nothing in Part 3 of the SOP Act precludes bringing or continuing proceedings under the construction contract, including where those proceedings deal with the same issues in dispute in the proceeding relying on Part 3. Thus, a judgment under ss16 and 17 is a provisional judgment in what it grants and what it refuses.[7] The statutory context both contemplates and permits inconsistent judgments.[8] This section is, in effect, the statutory manifestation of the “pay now, argue later” description often given to the policy behind the SOP Act and its counterparts in other states.[9]
[7] Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]–[46] per Vickery J, cited with approval in Pearl Hill Pty Ltd v Concorp Construction Group (Vic)Pty Ltd [2011] VSCA 99 at [11].
[8] Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd (2005) 62 NSWLR 385 at [22] per Handley JA, with whom Santow JA and Pearlman AJA agreed.
[9]Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor (2009) 26 VR 112 at [2] and [43]–[46].
31 Further, in considering any purported defences to a payment claim, it is important to be mindful of s48 of the SOP Act. This section provides that the provisions of the SOP Act have effect despite any contractual provision to the contrary. It further provides that any provision in any contract purporting to exclude, restrict or modify the operation of the SOP Act or that may reasonably be construed as an attempt to deter a person from taking action under the Act, is void.
32 This court has endorsed the hearing of applications under the SOP Act on a summary basis by summons on originating motion with affidavit evidence.[10] Such claims are properly assessed on the balance of probabilities,[11] with the quality of the evidence weighed having regard to the fact that the legislation seeks to facilitate a swift but temporary remedy.[12] Occasionally, a plaintiff nevertheless applies for relief under s16 by bringing a proceeding commenced by writ and statement of claim, then issuing a summons seeking summary judgment pursuant to s61 of the Civil Procedure Act 2010 (Vic) (“CPA”).[13] This can add an additional layer of complexity in determining the test to be applied to any defences raised.[14] However, the present proceeding was commenced by summons on originating motion, so questions of the application of the test under CPA ss61 and 63 do not arise.
Reasoning
[10] 3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [39]–[54]; see also SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [26].
[11] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449-450 per Mason CJ, Brennan, Deane and Gaudron JJ.
[12]3D Flow Solutions Pty Ltd v LTP Armstrong Creek Pty Ltd [2018] VCC 674 at [51]–[54].
[13] John Beever v Roads Corporation [2018] VSC 635; see also Best Fab Pty Ltd v Australian High Bay Installations Pty Ltd [2018] VCC 1053.
[14]SJ Higgins v The Bays Healthcare Group Inc [2018] VCC 805 at [31].
Defences Raised by the Defendant
49 By correspondence dated 10 August 2022, Train Street Development’s solicitors informed the plaintiff that it opposes the Payment Claim on the basis that:
a. the price for the Works was $1,347,500.00 and that it signed the Contract for the amount of $1,600,000.00 for the purposes of obtaining a loan from its lender. To date, Train Street Development has paid VK Constructions the sum of $1,581,411.65 and that all progress payments and variations save for the sum of $8,375.00 in respect of the Completion Invoice INV-0207 has been paid. The sum of $8,375.00 has been set off in respect of alleged defective works to the basement ramp by the defendant.
b. Invoice INV-0425, in the amount of $252,500.00 dated 6 May 2021 was sent under cover of a letter dated 8 June 2022 and shows the Payment Claim was not included and the only sum outstanding at the time was $58,575.00.
c. A number of invoices issued by VK Constructions to Train Street Development did not include prescribed wording for a payment claim within the meaning of the SOP Act.
d. The Completion and Final Claim was issued on 13 May 2021 and is not a valid claim pursuant to the SOP Act. Further that even if the claim was valid, which is not admitted, it was served outside the timed permitted and, therefore, is not a valid Payment Claim.
50 In Train Street Development’s written submissions, the defences under the SOP Act were confined to whether the progress claim satisfied the formal requirements of the Act under s14(2) and whether there was an applicable reference date.
51 The issue around whether the contract price was for $1,347,500.00 or $1,600,000.00 was not pressed as a basis for why VK Constructions’ claim should fail. I agree with VK Constructions that such a claim would fall within s16(4) of the SOP Act, being a defence that “arises solely out of the terms of the contract, its terms or its execution” and would not be open to the defendant as a ground to defend the present proceeding.
Did the payment claim adequately identify the construction work?
52 VK Constructions may only claim progress payments in respect of a constructions contract. Section 4 of the SOP Act defines “construction contract” as: “a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party”. “Construction work” is broadly construed under s5 of the SOP Act.
53 This issue is not in dispute between parties. I therefore accept that VK Constructions’ claim was made in respect of a construction contract with Train Street Development for domestic building works undertaken on four units.
54 There are formal requirements under s14 of the SOP Act and any payment claim from VK Constructions must be in the prescribed form and contain the prescribed information.
55 The defendant submits that the payment claims, the subject of this proceeding, does not satisfy the statutory requirements of s14(2)(c) and (d) of the SOP Act, because it does not identify with the necessary precision the construction work or related goods and services to which the progress payment relates and does not indicate the amount of the progress payment that the claimant claims to be due.
56 Whether a payment claim sufficiently identifies the construction work is an objective test.[15] The test is whether a reasonable person in the position of the defendant can comprehend the basis of the claim.[16] The test is not overly stringent; the court must not adopt an unduly technical or pedantic approach.[17] The context of the payment claim is relevant, including industry conventions and earlier contractual dealings.[18] The background knowledge of the parties from their past dealings and prior exchanges of information (including correspondence) are also relevant.[19] Thus, the court may look beyond the face of the payment claim.
[15]John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126, Lyons J at [83].
[16] Ibid.
[17] Ibid; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51] per Vickery J.
[18]Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 at [40].
[19] John Beever (Aust) Pty Limited v Paper Australia Pty Ltd [2019] VSC 126 at [83] per Lyons J; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [51] per Vickery J.
57 The authorities recognise that the court is to consider the payment claim, and in context.[20] The defendant submits that the Payment Claim fails to satisfy this threshold. It asserts that it does not sufficiently identify the construction work, the subject of the claim, which is a requirement of a valid payment claim pursuant to s14(2) of the SOP Act.
[20]Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391 at [40].
58 The defendant relied on Gantley Pty Ltd & Ors v Phoenix International Group Pty Ltd & Anor.[21] Justice Vickery found that “what is necessary is an identification of the work which is sufficient to enable a respondent to understand the basis of the claim and provide a considered response to it”.[22]
[21] [2010] VSC 106.
[22]Gantley Pty Ltd & Ors v Phoenix International Group Pty Ltd & Anor [2010] VSC 106 at [51].
59 The description of work in the Payment Claim refers to “balance from all invoices”. As raised by the defendant, it does not specify what works VK Constructions carried out and Mr Randhawa’s affidavit provides no further explanation of the alleged works. He deposes that on or about 8 June 2022, he instructed his solicitors to issue a letter of demand to the defendant annexing a copy of Invoice INV-0425, being the unpaid portion of the Contract Price, with a further discount applied to encourage the prompt payment by the defendant.
60 VK Constructions submits that the Payment Claim adequately identifies the works and says that it was served on the defendant as an annexure to correspondence issued by the plaintiff’s solicitors, confirming that the Payment Claim related to the difference between the price of the Works in the Contract and the amounts paid by the defendant to the plaintiff as of 8 June 2022.
61 I accept the submissions of the defendant that the Payment Claim fails the test enunciated in Gantley as there is a lack of identification of the work to which the Payment Claim relates in the reference to “Balance from all invoices” and there is on the face of the Payment Claim no identification at all of the work the Payment Claim relates to. There is no justification of the sum claimed, which would allow the defendant to make its own assessment of the amount payable and provide a payment schedule.
62 Therefore, the Payment Claim does not satisfy the criteria set out in s14(2) of the statutory requirements.
Was there a Reference Date for the Payment Claim?
63 The defendant claims that the Payment Claim has been served outside of the time permitted by ss14(4) and (5) of the SOP Act.
64 Section 14(5) of the SOP Act relevantly provides that a payment claim in respect of a progress payment that is a final payment may only be served within:
a. the period determined by or in accordance with the terms of the construction contract; or
b. if no such period applies, within 3 months after the reference date determined in accordance with s9(2).
65 Section 9(2)(d) provides that the reference date for a final payment, if the contract makes no express provision as to the matter, is the date immediately following the expiry of a defects liability period for any construction work or related goods and services provided under the contract.
66 It is common ground between the parties that the Contract did not contain any provisions that expressly define the period within which a final claim may be submitted by VK Constructions. Under s9(2)(d) of the SOP Act, the plaintiff could submit a payment claim within 3 months of the expiry of the defects liability period as varied from time to time.
67 There is a factual dispute between the parties as to whether there was an agreement to extend the defect liability period. Mr Randhawa deposes that in around November 2021, Mr Shah contacted him by telephone and advised that he was having trouble selling the units and enquired if VK Constructions would extend the defects liability period from 23 November 2021 to 22 May 2022.
68 Mr Shah denies that he requested an extension of the defect liability period and notes the settlement dates of the sale of the four units between the period 18 October 2021 and 28 February 2022. He says that the unit owners were pursuing VK Constructions for rectification works under the builder warranty and not under a defect liability period.
69 VK Constructions concedes that the alleged extension to the defects liability period was never articulated in writing, however, it contends that the course of conduct between the parties and the unit holders for rectification works supports its position and that the reference date for the purposes of s14(5) of the SOP Act was 23 May 2022, being the day after the end of the extended defects liability period.
70 The plaintiff has the onus of proof to make out its claim on the balance of probabilities. In my view, on the evidence before me, the affidavit material which asserts that there was an oral agreement to extend the defects liability period falls short of the onus of proof of such an agreement. The occupancy permit was issued on 24 August 2021 and the Contract provided for a 90-day defects liability period. The defects liability period ended on 23 November 2021.
71 For the above reasons, I accept the defendant’s submissions. The reference date for the final claim is the date immediately following the expiry of a defect liability period and may be served within 3 months after the reference date. This time had expired by the date of the Payment Claim being 6 May 2021 and by the date of service being 8 June 2022.
72 The Payment Claim is, therefore, not a Payment Claim within the meaning of ss14(4) and (5) of the SOP Act.
Had a Final Payment Claim Already Been Issued?
73 Section 14(6) of the SOP Act provides that once a payment claim for a claim in respect of a final, single, or one-off payment has been served under the SOP Act, no further payment claim may be served in relation to the construction contract in question.
74 It is common ground that on 13 May 2021, VK Constructions purported to serve on the defendant a Completion Invoice INV-0207 (“the Completion Invoice”). The Completion Invoice was issued in the sum of $67,375.00. The defendant contends that it can be concluded that it was intended to be a final claim as provided for by Clause 36 of the Contract.
75 The defendant claims that the Payment Claim is invalid because the Completion Invoice had already been served on 13 May 2021. Therefore, the Payment Claim dated 6 May 2021 and served on 8 June 2022 is a further final payment claim and falls foul of s14(6) of the SOP Act.
76 VK Constructions says that s14(6) of the SOP Act does not have any application in the present circumstances as the defendant concedes that the plaintiff never issued a valid payment claim within the meaning of the SOP Act in respect of the amounts claimed under the Payment Claim.
77 The defendant’s solicitors’ letter dated 10 August 2022 observed that a number of the original Tax Invoices provided to the defendant did not state as required by s14(2)(e) of SOP Act that they were made under SOP Act. In this regard, the defendant’s solicitors were instructed that the original tax invoices set out in a table in the letter and the original emails from VK Constructions attaching those tax invoices did not include the words:
“This is a payment claim made under the Building and Construction Industry (Security of Payment) Act 2002 (Cth) required by the SOPA. The table included the Completion Invoice dated 19 May 2021 with the notations “No wording in the tax invoice required by the SOPA Act. Of this sum $8,375.00 remains outstanding but has been set off in respect of defective works to the basement ramp”.
78 Mr Shah’s first affidavit deposed that a substantial number of Payment Claims and Variations sent to the defendant by VK Constructions made no reference to the SOP Act. He said that what happened was that the Payment Claims and Variations, which were forwarded in a link, were subsequently altered so that when he opened the link sometime after the date on which they were sent, they had been amended to refer to the SOP Act.
79 In Mr Shah’s second affidavit, he noted that on 16 September 2021 at 5.23pm, he received an email from Mr Randhawa attaching Invoice INV-0207, together with a link to “view invoice”. The Completion Invoice for the “Completion Train Street” balance of $67,375.00 does not contain the SOP Act wording. However, when one clicks on the “view invoice” link in the email, it shows the SOP Act wording with the balance of $8,375.00.
80 Mr Randhawa also conceded in his second affidavit that on 13 May 2021, VK Constructions issued an invoice for the “Completion” of the Works, in the amount of $160,000.00. Further, like all of the invoices issued up to this point, this invoice did not contain the prescribed SOP Act wording.
81 In light of the evidence set out above, I accept that at the time the Completion Invoice was sent to the defendant, it did not contain the prescribed SOP Act wording. As Mr Shah deposes, and I accept, the Completion Invoice was subsequently altered so that when he opened the link, sometime after the date on which they were sent, it had been amended to refer to the SOP Act.
82 As a result, I find that VK Constructions did not issue a valid final Payment Claim on 13 May 2021 and the Payment Claim dated 6 May 2021 and served on 8 June 2022 does not contravene s14(6) of the SOP Act. However, for the reasons set out above, the Payment Claim does not meet the statutory requirements under ss14(2)(c) and (d) and 14(4) and (5) of the SOP Act.
Conclusion
83 For the foregoing reasons, for the purposes of this proceeding, the plaintiff’s Payment Claim does not constitute a valid payment claim and thus does not fall within the scope of the SOP Act. The plaintiff’s summons on originating motion is dismissed.
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Certificate
I certify that these 20 pages are a true copy of the judgment of Her Honour Judge Burchell delivered on 16 September 2022.
Dated: 16 September 2022
Nikki Thomson
Associate to Her Honour Judge Burchell
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